Lots of oil in the U.S.

Here's an interesting article from Real Clear Politics citing some thought-provoking stats regarding untapped domestic energy resources. Things to consider:
- implications for alternative energy development
- implications for economic growth (and by extension poverty-reduction) at home

I think the article does a great job of illustrating the fact that there's no such thing as a free lunch. If you want more environmental quality, you're probably going to sacrifice something else. What if that something else is significant poverty reduction or world peace?

Back story reading:

The Solyndra controversy

Hydraulic fracturing (hydrofracking)

Saving species

Here are three articles that consider the merits of saving endangered species:

Panda 1
Panda 2
Dormouse
Hattip: DG

Jobs and recycling

Here is a link to a report stating that increasing the rate of recycling in the U.S. from 33% to 75% over the next 20 years could create a lot of jobs and less pollution.

I have not read the study all the way through.

Where will the jobs come from?
Have the analysts omitted anything?

Greenhouse gas tax and airlines

There's an interesting argument place between the US and the UK related to emissions from airlines.

Read about it here and here.

Economics and Darwin

Robert Frank (Econ prof at Cornell) has an interesting opinion piece in a recent LA Times. There are several parallels with this line of reasoning and the article I linked to in the last post. I'm not a fan of the political turn that Frank takes in the last two sentences. As you know, I think that our job as economists is to be as apolitical as possible, but I wanted you to read this.

Frank's article is based on his recent book "The Darwin Economy". John Whitfield of Slate reviews the book and provides another perspective (part critique, part agreement) on the issue.

Selfishness: problem or solution?

A long but excellent read here at the Atlantic. Incentives, common property, "greed" and an overly optimistic environmental movement.

Hat tip: Kafi G.

Should government subsidize renewable energy?

Robert Semple Jr. of the NY Times say yes.

not WTP for EVs

People want to use electric vehicles (that's good) but they aren't willing to pay for it (that's bad).
Here's a short article at CNET.
What to do?
Hat tip: DGill

Strong policy and tough decisions needed

This could be the mantra for just about any conservation policy, and is especially true in tough economic times, but in this case pertains to renewable energy in the Caribbean.
Here's a short article at the Barbados Advocate.
How do we garner the support for these tough decisions? How do we get people, businesses and governments to forsake personal gain for the long-term betterment of society? What are the primary obstacles? What are examples of other problems we face today (i.e. other than renewable energy) that can be presented in the same framework?

Readings on valuation

As we get deeper into our discussion of non-market valuation, I'm going to continue my efforts to convince you that economic analysis has a indispensable place at the conservation policy table. This argument is fairly easy to make when I'm talking to economists or economics students, but for those that have never really studied econ before, it's a bit tougher. This is because people who have only studied natural sciences may have a tendency to view all things dealing with markets as the causes of environmental problems rather than the solutions. I hope you're starting to see that it's both.

Please read:

Why Economics Matters for Endangered Species Protection (Shogren et al., 1998)

The Role of Economic Valuation in the Conservation of Tropical Nature (Naidoo, 2008)

Conservation Pays (Yuskavitch, 2007, Defenders of Wildlife)

Marine Conservation: How Economic Valuation of Ecosystem Services Can Help (Environment Matters, 2008)

Can Environmental Economic Valuation Techniques Aid Ecological Economics and Wildlife Conservation? (Loomis, 2000, Wildlife Society Bulletin)

Of additional interest:

Economic Incentives and Wildlife Conservation (Bulte et al., 2003)

Tons of references and links here:

Economic Valuation References WRI

Reefs here and here and here

Wetlands here

This is a tiny fraction of what's out there. Thoughts?

The political history of cap & trade

Good reading here at Smithsonian.com

Turtle bycatch improving

Here's an article from the local paper describing the downward trend in sea turtle bycatch. Turtle- excluder devices (TEDs) seem to be helping on a national scale but the NC fishers interviewed for the article don't seem to think that bycatch is an issue here. The article also cites a decreased number of vessels in the water (due to low profit causing exit from the industry) and a performance standard.

the Coase Theorem in action

Here at the WSJ

Here at the Independent

the true cost of a gallon of gas

Here is a report suggesting that externalities bring the true cost of a gallon of gas up significantly (between $5 and $15). The report is several years old and pre-9/11, so we can probably assume that the numbers would be higher today.

Here's a piece by Ezra Klein at the Washington Post from 2010 that discusses the same issues.

More here at Catalyst.

Collective action requires incentives

Gernot Wagner (an economist at Environmental Defense Fund) has a thought-provoking piece in yesterday's New York Times. He hits on a lot of issues that we've been discussing in class or will discuss later in the semester. Notably topics are the need for incentives to curtail externalities and the notion that it's easy to make marginal movements toward being "green" when you're rich.

Elkhorn coral and pollution

Next week we'll be beginning our discussion of externality theory, which allows us to look at the inefficiency created when costs are created by a market but are not accounted for in the price of the good. Once we understand the cause of the inefficiency, we can develop measures to address it.

Externality theory is easily understood in the context of pollution in its many forms. Here is a study suggesting that white pox disease in elkhorn corals is attributable to improperly treated human waste. We can categorize solutions into two broad groups: "command-and-control" (standards) and incentive-based systems.

What are the external costs associated with this pollution?
What solutions might work?

The cost of air pollution

A new study out of MIT calculates the long-term economic costs of lax air pollution standards in China. These costs include increased expenditure on health care and lost work and leisure time due to illness. The study estimates the total lost value (between 6 & 9 percent of GDP) and suggests that even modest pollution control efforts could have turned the loss into an economic gain via enhanced productivity. However, the authors of the study did not estimate the costs of implementing tighter standards. These would have to be accounted for to understand the true net change in economic welfare.

In related news, the US EPA is putting forth seven new environmental regulations for air pollution in the US. These regulations are being criticized for the extra costs that they will impose on businesses that have to comply. Read about it here at the News & Observer. The costs are indeed real (the price everyone pays for power will increase), but this is only half the story. There are also significant benefits to pollution control, as shown in the above MIT study. Fewer deaths and less illness means more productivity. Less illness means people can work harder, longer, stronger and smarter. Fewer sick children and elderly means parents and caregivers can work more. Framing the issue based only on an estimate of the costs or benefits is incorrect and misleading. We need both.

More on energy externalities

Great article here at Politico describing the external costs of our energy.
Everyone should read this.

The most important question of our age?

I think this is it: What is the backstop energy source?

The only options right now are nuclear, solar, hydro, geo, and of course fossil fuels like oil, natural gas and coal. Every one has pros and cons, which means this is great stuff for economic analysis. Will nuclear ever be safe? Will coal ever be clean? Will solar ever be cost effective? Is there something else on the horizon?

We know that we have to start addressing these questions, but we can't agree on how to do it.

Here's a link to an article discussing the results of a survey of consumer attitudes. Here's another poll on the same set of issues. Note the serious split between those that say "more" and those that say "less" for just about everything currently on the table. No wonder our politicians can't put together an energy policy... no matter what they advocate, around half the country will be opposed.

Pigouvian tax on gasoline

Interesting article here at 3P.

Note the importance of incentives in affecting behavioral change and the discussion of standards vs. market-based policies. I also like the discussion of the vulnerability to price shocks. Curtailing our use of gasoline is a kind of insurance against economic instability. As much as I like these arguments for raising the price of gas, we also have to recognize reasons for keeping the price of gas low (at least for some users). The U.S. is really big geographically speaking, so within country commerce may depend more critically on cheap transport than in smaller nations. Check out the linked Economist article. It's short and good.

Hog farms and water quality

Here's a story from Reuters about command-and-control regs on hog farms that are intended to improve water quality (in Manitoba). This is clearly an interesting application of cost-benefit analysis.

What are the benefits of tighter restrictions? Are these values market or non-market? For the non-market components, what valuation procedures might be used to estimate the monetary value of better water quality?

What are the costs of the restrictions? How might they be estimated?

The Coase Theorem in action

Here's a story at the WSJ about some really rich people arguing over views from their mansions.

Here's the part where the Coase Theorem comes in.

Hat tip: Tim Haab

This week

For the rest of the week I'll be in Port of Spain, Trinidad, attending a conference on sustainable development in coastal communities. Read about it here, and here. I'm giving a talk on Friday.

Driving externalities

Interesting (and kinda scary) example of estimating the external cost of an activity: Pollution from idling vehicles in traffic leads to premature deaths.

Read about it here at USA Today.

People don't seem to want electric cars

At least in the U.S.

The opposition seems to come from driving range issues and battery cost. From what I understand the battery cost worries are overblown. I'd consider buying one if they weren't so expensive, even with the subsidy. Right now I drive a beat-up old Honda Civic (1992 model and still runs like a champ), and get incredible gas mileage.

We know that gas prices are changing the way people drive and affecting purchasing power. Read about it here and here. So, what will it take for people to make big changes?

Outsourcing emissions

A new study published in the Proceedings of the National Academy of Sciences suggests that declines in emissions in developing world are misleading in terms of pollution gains by those nations. In short, while developed nations may be producing less emissions within their own borders ("territorial emissions"), they are consuming more products produced abroad where pollution standards are less stringent. When these "consumption emissions" are factored in, developed nations are actually producing more emissions, not less. China is the clear global leader in terms of manufacturing and outsourced emissions. My brother-in-law is currently living in China with his family (he designs running shoes for Nike), and tells us that sometimes the air is so bad that they can't go outside.

Can anyone think of a micro-level example where individual consumers outsource their pollution?

Hat tip: ENN

Coal pollution externalities in VA

The Chesapeake Bay Foundation has released a report cataloging the economic and environmental impacts of a proposed coal-fired power plant.

Here's a short blurb at the Washington Post

Here's the full press release from CBF

OK, so what do we have to take into consideration?

First, the source of the report is a conservation agency. The Chesapeake Bay Foundation does great work. But they have an agenda. Here's a link to CBF's main page. I'm not saying that they are wrong or lying or fudging data, just saying that when analyzing a situation objectively we must always question the source of our information.

Second, coal generates most of our electricity. Nation-wide, around half of all electric power comes from coal. In the eastern part of the country it's a much higher percentage. (aside: Think that electric car is "clean and green"? Think again.) We use so much coal because it is cheap. If we're going to curtail the use of fossil fuels, we have to be willing to pay for it. Higher electricity rates, higher prices at the pump.

Third, the report suggests significant health and environmental impacts. These are well known. More here from The US EPA.

So, like most things in life we have a trade-off. There are benefits from our actions and there are costs. The economic question is: do the benefits outweigh the costs? i.e. Is it worth it?

Some of you are probably wondering how we can objectively compare these disparate costs and benefits. How can we compare the value we derive from cheap electricity with the value of human and environmental health? This is a central issue that we'll be dealing with in this class, and the unit on economic valuation will help quite a bit. Short answer: it's difficult, but we can do it.

Before we get to the details, consider this: when we make decisions as individuals about what to eat, how fast to drive, and how much to exercise, are we not implicitly placing a value on our own lives? When we make decisions about what products to consume, how much to recycle, whether to ride a bike or drive a car... are we not placing a value on the environment?

I know that many of you are environmental studies majors, so I want you to consider how you perceive the value of the environment... do you think that environmental quality is "priceless"? Or are you willing to sacrifice some environmental quality for your own comfort and convenience?

Likewise for the econ and business majors... do you think markets truly send appropriate signals in all cases? Or can markets fail to efficiently allocate resources in some situations?

Welcome UNCW summer session students

Welcome to the blog.

This blog is used primarily by my students at UNCW and UWI.

I'll be posting links and questions here periodically.
Check back often.

The blog has been active for a while, so feel free to browse older content.

A unique illustration of the tragedy of the commons

On YouTube from Washington and Lee ... very cool.